Fed decision and US inflation data coming up
XM Group | Dec 11, 2023 10:07AM ET
- Fed set to hold interest rates steady on Wednesday
- USD reaction will depend on rate projections for next year
- Latest US inflation report to be released on Tuesday ahead of Fed
How many rate cuts will the Fed signal?
It’s been a great year for the American economy. Real growth is on track to hit 3% with some help from resilient consumer spending and an enormous government deficit. Meanwhile, inflation has been falling steadily, fueling speculation that the economy can achieve the elusive ‘soft landing’ that the Fed has been hoping for.
Against this backdrop, the Federal Reserve will announce its latest decision at 19:00 GMT on Wednesday. Markets are pricing in almost zero chances of a rate increase, so the focus will fall mostly on the updated interest rate projections and Chairman Powell’s commentary in his press conference.
An upside surprise in inflation could dampen speculation for Fed rate cuts next year, and by extension allow the dollar to gain some ground ahead of the Fed decision. Looking at the euro/dollar chart, a potential drop below 1.0720 could open the door for downside extensions towards the 1.0660 zone.
Beyond that, the other key event will be the release of retail sales on Thursday, in the aftermath of the Fed. Forecasts point to a slight drop in monthly terms, although nothing too serious.
In conclusion, there is some scope for these events to boost the dollar, in case the inflation report exceeds estimates and the Fed signals fewer rate cuts than markets have baked into the cake for next year.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.